BAKU, Azerbaijan, April 5. Inflation rate of Uzbekistan will increase in 2022, averaging 12.7 percent due to the pass-through of Uzbek soum depreciation, higher inflation expectations and food prices,Trend reports via the Fitch Ratings.
Fitch expect inflation to average 11.6 percent in 2023, although the inflation trajectory will be dependent on exchange rate volatility, potential adjustment of utility tariffs (gas and electricity) postponed during 2020-2021 and non-food and services' price stickiness.
After raising its policy rate by 300bp to 17 percent in March, the central bank of Uzbekistan is likely to maintain a tight policy stance (positive real rates) to manage expectations and avoid pressure on the exchange rate, said the agency.
The ratings forecast that the current account deficit will widen to 9.7 percent of GDP in 2022, from 6.9 percent in 2021, reflecting a close to 50 percent decline in remittances in USD terms.
Increased commodity exports, most notably gold and cotton, combined with a lower import bill on account of slower domestic demand and the weaker soum will somewhat mitigate the current account deterioration.
Fitch expects higher external deficits to be financed through a combination of drawdown of international reserves, access to official financing and net FDI.
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